Gov. Rick Snyder talked to the Free Press Editorial Board on Friday, Jan. 17, 2014, a day after his State of the State speech. / Detroit Free Press

Written by

Mark Stryker, Brent Snavely and Matt Helms

Detroit Free Press Staff Writers

Gov. Rick Snyder indicated Friday that he’s willing to bang the drum loudly for his proposal to funnel $350 million in state money to a rescue fund to shore up retiree pensions and protect the Detroit Institute of Arts in the city’s bankruptcy.

He also said that while the DIA is “critically important,” the key to winning legislative support for matching the $330 million already committed in charitable foundation pledges most likely lies in a concern for pensioners rather than paintings.

“I think there’s a lot more interest with respect to retirees then there is for the DIA,” Snyder told the Free Press editorial board. He added that while minimizing the impact of pension cuts would resonate the loudest statewide, the end result would be two-for-one solution.

“If as part of that, the DIA could also make sure that it wasn’t losing art and that it could be protected in a long-term fashion, I hope people would see that as a positive outcome,” said the Republican governor.

Spearheaded by U.S. Chief Judge Gerald Rosen, nine national and local foundations created the rescue fund to reduce pension cuts, prevent art from being sold and spin off the DIA into a private nonprofit. If approved by the city, unions, DIA, foundations and the court, the so-called grand bargain would help pave the way for a much swifter and less painful resolution to Detroit’s historic Chapter 9 bankruptcy.

Snyder barely mentioned Detroit and its bankruptcy in his State of the State address Thursday night. But on Friday, he touched on pensions, the DIA and other bankruptcy issues. He championed the mediated grand bargain as “a constructive process” that set a positive tone for the rest of the negotiations.

And while Snyder declined to say how he would stump for his own $350-million proposal, he said other efforts he supported with opposition from his own party — including a historic expansion of Medicaid last year — show he’s willing to fight for the issues he believes in.

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“If I find something that I’m going to really get behind, I don’t think I’ve shirked away from doing the follow-up work,” he said.

The DIA also is widely expected to contribute to the rescue fund, but the specific terms — including the overall total and time frame — remain in negotiations in the mediation process. Figures as high as a $100 million over 20 years have swirled as a possible target for the museum, but DIA leaders rejected those numbers as not feasible, given its commitment to raising hundreds of millions dollars in endowment funds plus $12 million annually for operations.

No one expects approval of the governor’s proposal to be easy. Many Republicans are deeply suspicious of anything that appears to be a bailout for Detroit, and even lawmakers prone to support the deal say they need more clarity of the details.

“A lot of us are cautiously optimistic that there is a solution here, but we need to know a lot more than we do now,” said Sen. Rebekah Warren, D-Ann Arbor.

Troubles at the Detroit pension systems — which the city says are underfunded by about $3.5 billion — have long made headlines. A Free Press examination in 2011 found that risky investments had cost the pension funds $470 million since 2008.

While Snyder praised the police and fire retirement fund as “reasonably managed,” he was sharply critical of the General Retirement System, which is said to be more severely underfunded. He said it was a fair question to ask whether it would be better off professionally managed.

“Is there a way to ensure more professional management of the funds?” Snyder said, adding that he was not advocating for a state takeover.

General Retirement System spokeswoman Tina Bassett wouldn't comment directly on Snyder's remarks. In a statement, she said that the GRS “today is one of the best funded municipal funds in the country, resulting in a top quartile performance for the last several years.”

“It is better funded than the State of Michigan pension fund,” her statement said. “Many of the comments made about the GRS are based upon practices that took place years ago.”

Snyder, who has staked a great deal of political capital on a positive outcome in Detroit’s bankruptcy, said he is hoping that the entire process is wrapped up before the end of this year. He is hoping the city can return swiftly to local control and a more secure financial path — despite rulings that appear likely to complicate a quick resolution to the historic Chapter 9 filing.

On Thursday, U.S. Bankruptcy Judge Steven Rhodes rejected a settlement that emergency manager Kevyn Orr’s negotiators reached to bring an end to a 2005 pension debt deal blamed for pushing the city into bankruptcy.

Snyder said he wouldn’t characterize his reaction as disappointed, but acknowledged that the decision threatens to slow down the bankruptcy process.